VES-13-18-CO:R:IT:C 112006 GEV
Chief, Technical Branch
Commercial Operations
Pacific Region
One World Trade Center
Long Beach, California 90731
RE: Vessel Repair; Entry No. 718-0000414-6; GREEN BAY V-33;
Spare Parts
Dear Sir:
This is in response to your memorandum dated November 26,
1991, forwarding an application for relief from duties assessed
under 19 U.S.C. 1466. Our findings are set forth below.
FACTS:
The GREEN BAY is a U.S.-flag vessel owned by Central Gulf
Lines, Inc., of New Orleans, Louisiana. The subject vessel
underwent shipyard work in Japan during the period of August 28-
30, 1991. Subsequent to the completion of the work the subject
vessel arrived in the United States in Portland, Oregon, on
September 11, 1991. A vessel repair entry was filed on September
16, 1991.
An application for relief was timely filed on November 12,
1991. The applicant has requested relief for various parts
claimed to have been imported into the United States, duty paid
under the Harmonized Tariff Schedule of the United States, and
installed on the vessel in Japan. In support of this claim the
applicant has submitted the following: (1) copies of the invoices
covering the parts in question; (2) copies of the manifest and
bill of lading; (3) a copy of the Customs consumption entry (CF
7501) for these parts; and (4) the vessel owner's certification
that the parts in question were purchased from Mitsui Engineering
& Shipbuilding Co. in Japan and are intended for use and
installation aboard the GREEN BAY, a cargo vessel documented
under the laws of the United States to engage in the foreign
trade.
- 2 -
The applicant also requests relief from duty assessed on
various charges covering travel, transportation and handling
listed on the Technomarine Co. Ltd. invoice dated August 27, 1991
(Item No. 17A) and the Kishi Keiki Seisakusho Co., Ltd. invoice
dated September 10, 1991 (Item No. 18).
ISSUES:
1. Whether evidence is presented sufficient to prove that
vessel parts were imported into the United States and installed
foreign aboard a U.S.-flag vessel so as to be exempted from duty
pursuant to 19 U.S.C. 1466(h).
2. Whether costs covering travel, transportation and
handling are dutiable under 19 U.S.C. 1466.
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in foreign or
coastwise trade, or vessels intended to engage in such trade.
The Customs and Trade Act of 1990 (Pub. L. 101-382) which
amends 19 U.S.C. 1466, exempts from duty under the statute, the
cost of spare repair parts or materials which have been
previously imported into the United States as commodities with
applicable duty paid under the Harmonized Tariff Schedule of the
United States (HTSUS). The amendment specifies that the owner or
master must provide a certification that the materials were
imported with the intent that they be installed on a cargo vessel
documented for and engaged in the foreign or coasting trade.
The certification required by 19 U.S.C. 1466(h)(2) as to the
vessel's documentation (foreign or coasting trades) and service,
will be made by the master on the vessel repair entry (CF 226)
at the time of arrival. The fact of payment of duty under the
HTSUS for a particular part must be evidenced as follows. In
cases in which the vessel operator or a related party has acted
as the importer of foreign materials, or where materials were
imported at the request of the vessel operator for later use by
the operator, the vessel repair entry will identify the port of
entry and the consumption entry number for each part installed on
the ship which has not previously been entered on a CF 226. In
cases in which the vessel operator has purchased imported
materials from a third party in the United States, a bill of sale
for the materials shall constitute sufficient proof of prior
importation and HTSUS duty payment. This evidence of proof of
importation and payment of duty must be presented to escape duty
and any other applicable consequences.
In addition, we require certification on the CF 226 or an
accompanying document by a person with direct knowledge of the
fact that an article was imported for the purpose of either then-
existing or intended future installation on a company's vessels.
Ordinarily, the vessel's master would not have direct knowledge
of that fact, and an agent may also be without such knowledge.
Customs has in the past linked this duty remission
provision to the duty assessment provision in subsection (a) of
the statute. In the face of argument to the contrary we have
held that a two-part test must be met in order for remission of
duty to be granted: first, that the article must be of U.S.
manufacture; and, second, it must be installed by a U.S.-resident
or regular vessel crew labor. The reason for this position is
that (d)(2) refers to "such equipments or parts...", etc.,
without any other logical placement for the word "such" occurring
in that subsection. We inferred that "such" articles must refer
to those installed under subsection (a), absent any other
reasonable predication. The new amendment puts this issue to
rest; it is clear that as concerns foreign-made parts imported
for consumption and then installed on U.S. vessels abroad, the
labor required for their installation is separately dutiable. A
part may now be considered exempt from vessel repair duty albeit
the foreign cost labor is dutiable.
Uniform treatment will be accorded to parts sent from the
United States for use in vessel repairs abroad, regardless of
whether they are proven to be produced in the U.S., or have been
proven to have been imported and entered for consumption with
duty paid. In both cases, the cost of the materials is duty
exempt and only the cost of foreign labor necessary to install
them is subject to duty. Crew member or U.S.-resident labor
continues to be free of duty when warranted.
The effective date of this amendment makes this section
applicable to any entry made before the date of enactment of this
Act that is not "finally liquidated" (i.e., for which a timely
protest was filed or court action initiated) on the date of
enactment of this Act, and any entry made--
(A) on or after the date of enactment of this
Act, and
(B) on or before December 31, 1992.
Since the subject entry has not been "finally liquidated" as
noted above, the new section 1466(h) is applicable to this entry
as it relates to spare parts.
Upon reviewing the record, it is apparent that the
documentation submitted is sufficient to justify relief for the
parts in question under 19 U.S.C. 1466(h). In addition, the
travel, transportation and handling charges for which the
applicant requests relief are not dutiable under 19 U.S.C. 1466.
HOLDINGS:
1. Evidence is presented sufficient to prove that vessel
parts were imported into the United States and installed foreign
aboard a U.S.-flag vessel so as to be exempted from duty pursuant
to 19 U.S.C. 1466(h).
2. Costs covering travel, transportation and handling are
not dutiable under 19 U.S.C. 1466.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch